On November 21, 2011, a fire at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $12,000. The following information was available from the records of Hodge's periodic inventory system:

Based on recent history, Hodge's gross profit ratio on Product Tex is 35% of net sales.

Required:
Calculate the estimated loss on the inventory from the fire, using the gross profitmethod.

Transcribed Image Text:

Inventory, November1 Net purchases from November 1, to the date of the fire 1,40,0 Net sales from November 1, to the date of the fire 220,000 1,00,000